Industry News

Citigroup says subprime loans will dent Q3 profits

$1.3 billion in losses expected on mortgage-related investments

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Citigroup Inc. said Monday it expects third-quarter profits will be off 60 percent from last year because of about $3.3 billion in write-downs and losses on leveraged loans, subprime mortgage-backed securities (MBS), and other investments. In securities and banking, Citigroup said it lost $1.3 billion on subprime MBS warehoused for future collateralized debt obligation (CDO) securitizations, leveraged loans warehoused for future collateralized loan obligation (CLO) securitizations, and CDO positions. Citigroup also wrote down by $1.4 billion the value of leveraged finance commitments totaling $57 billion at the end of the third quarter. Another $600 million in pretax losses were attributed to fixed-income credit trading, which suffered from "significant market volatility and the disruption of historical pricing relationships." Citigroup's Global Consumer division saw credit costs increase by $2.6 billion, driven up by higher credit losses and increased loan loss reserves...